Housing starts in S.A. show an increase

New home construction is on the upswing for the first time in more than three years in San Antonio — a sign the worst of times might be in the local real estate market's rearview mirror.

However, this “doesn't mean it's time for the big happy dance,” said Jack Inselmann, vice president of the U.S. Central Division of housing research company Metrostudy. “It appears that it's not getting any worse. And that's the first step.”

No one knows what will happen to the market when the federal tax credits available to certain home buyers disappear.

The tax credits — up to $8,000 available to first-time home buyers and up to $6,500 available to current owners who've been in their houses for at least five years — require that people be under contract by today and close the deal by June 30.

San Antonio builders started 1,849 single-family homes during the first quarter, a 33 percent increase over the first quarter of 2009, according to a new Metrostudy report.

And the market is not flooded with new homes for sale.

Builders have been conservative — thanks in large part to the lack of bank lending for real estate projects — about the number of completed, vacant homes on the market.

There were just 1,584 so-called inventory homes in the area at the end of the quarter. That's nearly 400 fewer available new homes than at the same time last year.

“The numbers show bottoming and stabilizing. There's some good activity in all price ranges,” Inselmann said. “There's no doubt that everyone's attitude is better.”

Despite the uptick in builder optimism, nothing is easy or certain.

“What will happen to sales beginning May 1? Could things move to a lull the last six months of this year?” Inselmann asked. “Yes. We don't expect it just to crater.”

And although the number of home starts increased, builders in the first quarter closed 1,710 homes, a 17 percent drop compared to the first three months of 2009.

Closings typically improve after home starts improve, Inselmann said. He expects that will be the next number to move higher.

Another looming issue is the number of vacant lots in the San Antonio area.

The number of lots has declined to 23,047, a 36.5 month supply. It's a high number, but because bank regulators consider land development one of the riskiest bets in real estate, Inselmann said that number will keep dropping at least through the end of the year.

Already, Moore said, there's a shortage of lots in some of the most popular locations and price ranges in San Antonio, but an abundance of vacant lots in luxury neighborhoods and parts of the city with less demand.

Inselmann said the industry needs to be able to start developing more lots so there isn't a shortage later. It usually takes 18 months to develop a neighborhood.

The boost in new starts won't yet mend the damage done by the recession.

To survive, builders in recent years have done everything from laying off workers to offering upgrades such as free granite countertops. Some have switched from building luxury homes to building more affordable products. A few custom builders have started doing remodeling work.

To drum up sales, builders continue offering bonuses to real estate agents who bring in clients.

Subdivision developer Michael Moore said he knows several home builders that remain on the brink of going out of business because of lingering problems getting credit. Builders continue having a hard time, even when they have clients in hand, getting financing for construction.

“One of our biggest concerns as an industry is that there just isn't enough money for us to do what we need to do to stay in business,” Moore said. “It's been a big issue. I think the reality is that we probably could have done more (home) starts if there had been more credit available.”